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Hints & Tips

Cash Flow

It's essential to determine potential cashflow prior to making a residential real estate investment.

Whether you're looking to negatively or positively gear a property, the bottom line must be assessed.

The basic cashflow calculation method is as follows:

Income (Rent and any other positive return the property is making)
Less
Expenses (Interest on your loan, property management fees, rates, tax and insurances)
= Cash Flow

My calculation method is slightly different.

I like to suggest a buffer on each investment property which usually entails borrowing at least $10,000 more than what a client needs.
This means that any unexpected expenses (or job loss, maintenance, adjustment in rental return) are covered and there are no surprises.
The buffer funds are put into a high interest bearing account and any proceeds flow back in to the income, or put into an offset account against your own home loan.
I also include anything that can be added in from taxation rebates including depreciation and deductible costs (including all running costs).
Remember an investment property is like running a business and needs to work for you.
The above suggestions are from my own personal experience over many years and suit me - please get in touch for specific advice regarding your needs.

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